Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer requirment 1 (WACC) & 2 (Project discount rate) Gnomes R Us is considering a new project. The company has a debt-equity ratio of

please answer requirment 1 (WACC) & 2 (Project discount rate)
image text in transcribed
Gnomes R Us is considering a new project. The company has a debt-equity ratio of .85. The cclmpany's cost of equity is 14.5 percent, and the aftertax cost of debt is 7.8 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +2 percent. Requirement 1: What is the company's WACC? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Requirement 2: What discount rate should the firm use for the project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions